27 September 1996

Do a B & B with your Crest shares

FARMERS with Dairy Crest shares should consider selling them – and then buying them straight back again, says Vicki Oliver, senior tax manager with accountants, Grant Thornton.

The price at which they are repurchased will then be used as the "base cost" for calculating any future capital gains tax upon disposal. Otherwise, the base would be zero, increasing the capital gain and, with it, the potential tax bill.

Such action – known as "bed and breakfasting" – may be particularly useful to those intending to keep shares for some time, she says. But there are potential disadvantages, such as any sudden rise in the share price between selling and buying and the brokers costs.

The question of capital gains tax may arise from Dairy Crest share dealings because – unlike sales of land, buildings and quota – the proceeds cannot be "rolled over" into other assets.

Farmers do, however, have a £6300 personal annual exemption from the tax.

This means that for those taking full advantage of "bed and breakfasting", it could be worth up to £2520, assuming a tax rate of 40%.

"The exemption cannot be carried over from year to year, so its a case of use it or lose it," explains Ms Oliver.

Losses, however, can be carried over for capital gains tax purposes, says Ms Oliver, citing the example of owners of now-worthless potato quota.

&#8226 Farmers should remember the value of Dairy Crest shares will be treated by the Inland Revenue as income.